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Contingent Labor Use Forecast is Cloudy with a Chance of Storms

The contingent labor market of consultants, temporary employees and contractors has become a vital segment of the American talent mix. As the supply of talent increases and demand for services grows, the relationship between workers and buyers is more complex than ever.

The users of contingent labor are at odds with the labor pool they are trying to engage. Risk adverse companies are rejecting the use of independent talent rather than building processes to attract and engage them. This all-or-nothing approach can put companies at a competitive disadvantage and eliminate a valuable source of top talent.

While some organizations struggle with balancing the risks, the independent worker population is 30 million strong and growing. Further, marketplaces for talent are proliferating, creating the ability for end users to directly procure this talent on their own.

In this perfect storm, it is not hard to envision a future where the vast majority of non-employee labor is discovered not through intermediaries, but directly by companies’ internal recruitment. This disintermediation has already happened in many other areas of the economy (stock brokering, travel sites, retail purchases, to name a few), but has been slow to take in the staffing and consulting industry… until now.

Some companies have already embraced a direct-to-talent strategy. They find contract talent on their own utilizing online services like LinkedIn and many of the other dozens of labor marketplaces, and then try to figure out the best way to engage them given the need to be fulfilled.

Of course, there are risks to these direct engagements, such as the potential tax-related penalties due to worker misclassification, wage and hour lawsuits and more. While I do not recommend ignoring the risks, there are ways to meet the needs of the individual and organization to find the best engagement model that suits the worker. This, however, requires the de-commoditization of talent.

Contingent talent has been commoditized in recent years by the need to standardize on-boarding processes and control costs. In some cases, this commoditization has reduced talent quality and provided the workers with negative experiences. At MBO Partners, many top consultants tell us that they prefer to work with small companies and startups. According to these consultants, it is easier to engage with these companies, the rates are better and the projects are more enticing.

This is not to say we need to dismantle all contingent labor processes, but they may require some overhaul. The pendulum has swung too far away from the needs of the worker for a frictionless experience. Below are 5 concrete recommendations that you can implement today to take your contingent labor forecast from cloudy to clear:

1. Allow for a greater percentage of direct-to-contractor engagements. This includes allowing internal or outsourced recruiters to find contingent labor.
2. Find vendors that understand how to provide these directly recruited contractors an easy, efficient engagement experience. In this new era of contract work arrangements, you need to be the “Client of Choice” as well as the “Employer of Choice” in order to be attractive to the high talent workers.
3. Identify areas of friction and attempt to reduce or eliminate these pain points. These include, but are not limited to, numerous bulky systems to manage, overlong payment terms and complex on-boarding processes.
4. Begin reviewing online marketplaces to both expand your talent pool and possibly gain cost advantages in the long run.
5. Work with your vendors (or MSPs as needed) to allow them to recruit independent or freelance talent, provided they use a vendor of choice for mitigating the risks of engaging the freelancers.

The days of one-size-fits all employment solutions have jumped the shark. A greater variety of highly qualified professionals are choosing alternative working relationships. The future of work is upon us, and engaging contingent labor must be inclusive of the growing population of independent talent- with a portion of that talent recruited directly by you.

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